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Samsung’s new smartwatch

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Global briefs from the Economist

  • September 9, 2013 - 5:30 PM

Global business

It was a big week for the mobile-phone industry, with the announcement of two long-mooted deals. In the first, and after years of talks, Verizon agreed to buy the 45 percent stake held by Vodafone in Verizon Wireless, the pair’s joint venture in America, for $130 billion.

In the second big deal of the week, Microsoft beefed up its business in mobile devices and services by agreeing to pay $5 billion for Nokia’s handset division, which makes smartphones based on Windows. Nokia had tried various turnaround plans to tackle its shriveling market share. It still will exist, focusing on networks and mapping, but 32,000 of its staff now work for Microsoft, including Stephen Elop, who was its chief executive. He is now a candidate to replace Steve Ballmer when he steps down as Microsoft’s boss.

Samsung unveiled its first smartwatch, the Galaxy Gear, beating Apple in bringing the first significant wearable device to market. The watch will cost $300 and can link only to Galaxy phones and tablets; other new smartwatches will work with lots of Android products. It is still unclear how much demand there is from consumers for the gadgets.

LinkedIn said it would issue new stock in a secondary offering, through which it should raise $1 billion. The social network for professionals has seen its share price rise by 200 percent since its IPO in 2011.

Standard & Poor’s raised the ante in its legal fight with the U.S. government when it asserted that it is being sued in “retaliation” for exercising its right to “free speech” in downgrading America’s AAA credit rating. S&P made the claim in court papers it filed defending itself against the lawsuit, which alleges that S&P gave sound ratings to bad mortgage products to keep its clients in the banking industry happy.

Bank of America decided to sell its remaining 1 percent stake in China Construction Bank, which should fetch around $1.5 billion. Many big U.S. banks bought stakes in Chinese state banks several years ago, and have been cashing in their lucrative holdings.

Ryanair’s share price fell sharply after it issued a surprise profit warning amid a price-cutting war among Europe’s budget airlines. The carrier said sales were weak during the summer and bookings are down for this autumn.

Yankee Candle, which is based in Massachusetts, was bought by Jarden, a consumer-products company that owns a wide range of brands, in a $1.8 billion deal. The candle firm started in 1969 when its teenage founder made a Christmas gift for his mother. According to its “Learning Scentre,” it now produces 200 million aromatic candles a year and is expanding in Europe.

Political economy

The OECD revised its growth forecasts to reflect a moderately better outlook in rich countries and the “widespread loss of momentum” in emerging markets. It now expects output in America, Japan and Germany to expand by 2.5 percent at an annualized rate in the third and fourth quarters. Britain’s GDP is projected to grow by 1.5 percent this year, 0.7 percentage points higher than the OECD’s previous estimate.

Mexico’s president, Enrique Peña Nieto, delayed his first state-of-the-nation address by a day after Congress was blocked by teachers protesting against an education reform. The bill was overwhelmingly passed by the Senate last week.

Brazil’s lower house unanimously approved a law to ban secret voting in Congress, one of the demands of the protest movement that swept the country in June.

A power cut left 70 percent of Venezuela in darkness. Nicolás Maduro, the president, blamed sabotage by the “twisted and desperate minds” of the opposition. The finance minister admitted that the economy had “structural problems.”

India’s upper house of Parliament approved a plan to subsidize food for two-thirds of the population. The scheme, which was passed by the lower house last month, aims to make food a legal right and provide grain every month to 800 million poor people. India accounts for a third of the world’s poor and supporters say the bill will help reduce hunger. Opponents say it is ill-thought-out and expensive.

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